The current model for financial services poses significant disadvantages for both the consumer and the supplier of any product or service that requires an evaluation of the consumer's credit report. The current process is familiar to most everyone. Approval for a financial service offer requires obtaining the applicant's credit report. Any financial service supplier pulling a credit report must have a consumer's personal information. Therefore, it is impossible to shop anonymously directly with the company providing the service. With each credit report requested, the consumer's credit rating is further harmed, making it undesirable to apply frequently. As a result, consumers fail to receive the best offer that they qualify for because they can't compare offers from a broad range of suppliers without negatively impacting their credit rating.
There are other problems associated with the current financial services model. For example, consumers cannot determine, from advertising, if they qualify for a particular offer until they apply to the supplier. Consumers cannot determine if an offer from a particular supplier is the best one that they can receive from that supplier. Most suppliers will not tell a consumer that they qualify for the advertised loan at 12% interest and also tell them they qualify for a loan at 8%. Consumers with poor credit are frequently excluded from the majority of offered financial services, but could also benefit from the ability to receive multiple competitive offers from those suppliers willing to extend credit to sub-prime borrowers. Consumers cannot easily shop for and compare offers to replace their existing services, and they cannot shop for and compare offers for multiple services from the same supplier and take advantage of relationship rates.
The present situation is also detrimental to the supplier of good and services. Since there is no realistic way to determine the risk associated with lending to a consumer before that consumer applies, the supplier must advertise to a broad spectrum of consumers in order to obtain consumers who fit in the desired range of risk, thereby increasing the cost for the supplier. Suppliers also cannot price to actual consumer risk before making the offer. Typically, most financial services are uniformly priced over a wide range of credit scores to ensure the widest range of acceptances to cover marketing, sales and processing costs, and an acceptable rate of rejections and the resulting consumer dissatisfaction. This uniform pricing system is detrimental to the consumer as well, because those with higher credit scores (and less risk) are qualifying for the same product that those with lower credit scores (and higher risk) qualify for, forcing those who would otherwise qualify for a better rate to cross subsidize those at the lower end of the qualification range.